State begins crackdown on black market marijuana retailers, starting in Costa Mesa

State authorities teamed up with local police to shut down an unlicensed marijuana shop in Costa Mesa, in what regulators say is the first of many coordinated efforts to target California’s massive black market for cannabis.

The bust signals a clear shift, with the state moving from issuing warnings for off-the-grid cannabis retailers to cracking down on operators who haven’t made efforts to comply with state licensing requirements and regulations that kicked in nine months ago, on Jan. 1. That likely includes thousands of businesses, with industry research firm New Frontier Data estimating California’s black market remains more than four times larger than the state’s legal market in 2018.

“We gave people an opportunity to come out of the shadows and to get adjusted to the new legal market,” Alex Traverso, spokesman for the Bureau of Cannabis Control, said Tuesday.

“I think it’s safe to say that any kind of unspoken grace period is over.”

The Bureau of Cannabis Control has received more than 1,000 complaints over the past nine months, Traverso said, mostly related to businesses reportedly selling marijuana without licenses.

Many of those complaints have come from businesses who’ve paid hundreds of thousands of dollars to secure state and local permits, cover tax bills and comply with testing requirements. Those business owners say they can’t compete with illicit shops who can undercut their prices and don’t have to comply with rules that limit hours of operation, potency of products and more. Traverso said those licensed businesses have been flooding the state with complaints in hopes of getting underground competitors shut down.

Several of those complaints were about the Church of Peace and Glory in Costa Mesa.

Despite its name, authorities say the facility that shared a parking lot with the 7-Eleven on Irvine Avenue at 17th Street did not appear to be using marijuana as part of any sort of religious service. Instead, it advertised itself on dispensary directory Weedmaps.com as a “chic recreational cannabis boutique” selling marijuana to anyone 21 and older with an ID.

While medical and recreational marijuana are now legal in California, cities get to decide if they will allow cannabis retailers and other cannabis-related businesses in their boundaries. Costa Mesa doesn’t permit marijuana stores of any kind, though it does allow cannabis distribution, manufacturing and testing labs. All cannabis businesses need local and state permits before they can begin operations.

Costa Mesa Police say Omid Delkash, 47, opened the Church of Peace and Glory in March, and that they launched an investigation of the shop two months later. Costa Mesa Code Enforcement issued two citations for an unlawful marijuana business at the site.

The Costa Mesa Police Department served a search warrant at the facility on Friday, Aug. 24, getting help from the Department of Consumer Affairs’ Division of Investigation-Cannabis Enforcement Unit. Authorities said Monday that they arrested Delkash without incident and seized an undisclosed amount of cannabis, edibles and tobacco products.

A phone number for the shop has been disconnected and no one immediately responded to an emailed request for comment on the search.

Delkash is charged with four misdemeanor counts of transporting, selling and furnishing cannabis. Charges are tied to sales that allegedly took place in May, twice in June and in July.

Those charges would have almost certainly been felonies two years ago, with Delkash then likely facing up to four years in prison. But Proposition 64, which legalized recreational marijuana in November 2016, downgraded just about every marijuana-related crime in the state. Now, unless the district attorney pursues an enhanced sentence for repeated offenses, Delkash may face just six months in jail.

Delkash pleaded not guilty during an arraignment Monday. He is being held in lieu of $150,000 bail at the Central Men’s Jail in Santa Ana, with his first hearing set for Friday.

The Newport Beach resident has an extensive criminal history in Orange County dating back to 1996, according to court records, with prior convictions that include battery, forgery, burglary and grand theft. Such a record doesn’t automatically disqualify Delkash from getting licensed to sell marijuana in California, though the cases involving fraud and violence could be grounds for state and local authorities to deny him permits.

The Church of Peace and Glory case marks the first time Costa Mesa police have collaborated with state marijuana regulators, according to police department spokeswoman Roxi Fyad. She said the partnership gives them additional resources and investigatory tools to go after unlicensed marijuana businesses.

Since Jan. 1, the state has sent more than 2,500 cease and desist letters to marijuana businesses that appear to be operating without licenses in California, according to Traverso. Going forward, the bureau will continue to send warning notices, he said, but officials also will step up enforcement against businesses that don’t appear to making any effort to comply with state laws.

Right now, Traverso estimated Consumer Affairs’ cannabis enforcement unit is investigating between 500 and 600 complaints the bureau has forwarded their way. And he said we can expect to see more unlicensed marijuana businesses shut down “relatively soon.”